How to manage accounting in your Business
Updated: 6 days ago
Among the many challenges of owning a business, keeping the Business's accounts may be one of the most important. Large companies typically employ teams of specialists to carry out this activity. Still, small business owners must have at least a basic understanding of the subject to ensure the smooth running of their Business. If you have a small business or plan to start a new venture, this guide will be of great use to you.
What is the accounting of a company?
The accounting of a company is the activity responsible for keeping a detailed record of the financial operations of said entity. Thus, the company will be able to know the origin and destination of its resources and keep track of the assets and capital that it has at any time.
What is the purpose of keeping the accounts of a company?
Keeping correct accounting is essential for the smooth running of any business. Its benefits are many, but we can group them into three categories.
It is a legal obligation
The first benefit of accounting is that it will allow the Business to meet its tax obligations. As you may well know, companies must pay taxes to be local and federal governments, and the only way to file tax returns in compliance with the laws is by referring to the company's accounting.
To assess the financial situation, it is not enough to look at your bank account balance and make sure it is positive. The reality is that the economic landscape of a company includes a considerable number of factors and, to evaluate them, the image that accounting gives us is required. You will need to consider many factors, such as accounts receivable, debt, operating expenses, and cash flow, among many others. Only through genuinely reliable accounting records will you correctly understand your situation and therefore design effective strategies.
Operating a business involves making any financial decisions. You will have to decide, for example, how much to reinvest and in what to do it, the optimal salary for your employees, and the price at which you should offer your products and services, among many other things. All these decisions depend directly on your financial situation, and, as we already mentioned in the previous point, the only way to understand it with certainty is through effective accounting.
What do I need to keep the accounts of my Business?
Reliable accounting is obtained by keeping an accurate record of all your business operations. For this, you must archive and update various documents that will serve as the basis for making all the corresponding calculations. Here are the basics you will need to collect and maintain:
The invoices are documents that record transactions between businesses and individuals, so it will be essential to calculate your income and expenses. When your business makes a sale, you must generate an invoice filed as proof of that income. Similarly, when your company acquires a product or service necessary for its operation, the supplier must issue an invoice that guarantees the said transaction. The latter will be considered as expenses.
Other proof of expenses and income
Some transactions do not generate invoices as such. For example, bank loans can be verified through your account statement. In the same way, the deeds of a real estate count as proof of an asset if they are in the name of your company. We recommend that you visit this page of the Internal Revenue Service (IRS), where you will find an extensive list of the records and vouchers you must keep for your Business.
The ledgers are (physical or electronic) documents in which a company keeps a record of all operations carried out. There are many types whose use will depend on the specific needs of each business, but there are two main ones that every company must carry.
As we mentioned earlier, paper bookkeeping is a thing of the past. Today, most companies of all sizes use computer services to carry out this activity. There are a wide variety of payment options, but there are also very low-cost or free options for limited budgets.
Excel is a tool developed by Microsoft to generate spreadsheets. While this software comes at a cost, many personal computers are licensed for use out of the box or contain a similar alternative, such as Numbers for Apple computers or Google Sheets that can be used for free on almost any device.
What you need to know: These applications have not been specifically designed to keep accounting records; however, there are many free templates with which you only need to record the financial movements of your company and enter the required values.
We hope you find this guide helpful so that your business accounting does not impede your success. Remember that accounting records, in addition to being a tax obligation, provide you with many benefits. Dare to put our tips into practice, and you will see that keeping your company's accounting is not as difficult as it seems.